Financial Services – Update on UK and European Regulatory Developments In this issue: Part A – Regulation of Financial Markets Part B – Regulation of Investment Management Part C – Regulation of Investment Funds Appendix: Regulatory Calendar – Key Milestones Part A – Regulation of Financial Markets Development Jurisdiction Stage and Timing Impact and Considerations Current Key Documents and Further Guidance Short selling bans introduced by individual EU member states EU Ongoing. The European Securities and Markets Authority (ESMA) maintains a table of the short selling bans currently in force by EU securities regulators. Recommended actions: Firms should monitor all short sales and ensure that net short sales do not take place in breach of restrictions. Click here for ESMA’s update on measures adopted by competent authorities on short selling. 2 Development Jurisdiction Stage and Timing Impact and Considerations Current Key Documents and Further Guidance Mandatory central counterparty clearing of OTC derivatives EU The European Market Infrastructure Regulations (EMIR) came into force on 16 August 2012. For the clearing obligation to apply, clearing houses must be authorised for clearing and classes of derivatives must be designated by ESMA as subject to the clearing obligation. Products which are currently cleared by clearing houses will be the first to be designated. The FSA estimates the first quarter of 2014 as the earliest date when the clearing obligation will apply. The reporting obligation starts on 1 July 2013 for interest rate and credit derivatives and on 1 January 2014 for other derivative classes. The Regulations introduce mandatory clearing of OTC derivatives via one or more central counterparties (clearing houses) which will be authorised by an EU regulator, and mandatory reporting of specified classes of derivatives trades to a trade repository. Recent developments: The European Commission (the Commission) and the European Parliament have adopted ESMA’s technical standards, with the proviso that the clearing obligation on non-financial firms will be phased in over a period of time. Recommended actions: Look out for announcements that transaction types have been designated for clearing and for changes in counterparty margining requirements. EMIR’s impact will be significant, particularly in terms of (i) the cost of posting margin; (ii) changes to booking systems and processes; and (iii) the clearing documentation required to be put in place with each clearing member. Click here for the Commission’s derivatives page, including link to EMIR. Click here for ESMA’s technical standards. Click here for the FSA’s EMIR website. Click here for the Commission’s EMIR Q&As (recently updated). Short selling disclosures and restrictions EU The Regulations on short selling of shares and sovereign debt and various sets of related technical standards came into force on 1 November 2012 and have direct effect throughout the EU. The Regulations introduce: (i) mandatory disclosure of net short positions to the regulator; (ii) restrictions on naked short selling; (iii) a prohibition on uncovered positions on sovereign credit default swaps and (iv) regulator powers to impose temporary restrictions during stressed markets. Recent developments: The FSA will introduce electronic reporting through an internet portal in due course. In the meantime, it has made the disclosure forms available from its website. The forms will need to be downloaded, completed and returned by email to the FSA. Short sales of shares listed elsewhere in the EU should be reported to the relevant EU regulator. Recommended actions: Firms should monitor all short sales and ensure that disclosure is made in compliance with the Regulations. Click here for ESMA’s short selling Regulations website (including text of the Regulations). Click here for the FSA’s short selling regulations website. 3 Development Jurisdiction Stage and Timing Impact and Considerations Current Key Documents and Further Guidance Review of the Market Abuse Directive EU The Commission published a proposal to revise the Market Abuse Directive (MAD II) on 20 October 2011. It consists of the Market Abuse Regulation (MAR) and a supplementing EU Directive on criminal sanctions for insider dealing and market manipulation (CSMAD). The UK government has for present exercised its discretion not to opt in to CSMAD. The EU parliament will consider the proposals in June 2013. The Commission intends that the scope of the existing market abuse regime will be extended to multilateral trading facilities (MTFs) and organised trading facility (OTFs), as well as regulated markets. Also in scope are related financial instruments traded on an OTC basis which can have an effect on instruments traded on a trading venue. Under the existing regime, the market integrity and transparency rules apply to commodity derivatives markets, but not to the underlying markets. The Commission intends that MAR will govern transactions or behaviour in the underlying spot markets which are related to, and have an effect on, the financial and derivative markets which are within the scope of MAR. The trading of emission allowances will also fall within the scope of MAR. Recommended actions: Prior to adoption, firms will need to identify relevant instruments in scope and undertake a full compliance review of market abuse procedures, including reporting procedures. Click here for the Commission’s proposal. Click here for the current draft of CSMAD. Click here for the current draft of MAR. Financial Transactions Tax EU The Commission adopted its proposal for a Directive on a financial transaction tax 14 February 2013. The financial transaction tax (FTT) will apply to transactions in financial instruments, (such as bonds, shares, derivatives and fund units) OTC or on a market to which a financial institution established in an EU Member State is a party, and where at least one party to the transaction is established in an EU Member State. Financial institutions include UCITS and AIFs. Member States will apply the rates of FTT, which must be at least 0.1% of the consideration (for shares and bonds) and 0.01% of the notional amount (for derivatives). Securities issues are exempt. The UK is not participating in the Directive and the UK Treasury has signaled its opposition to the FTT. Due to the lack of EU consensus, 11 EU countries have been authorized by the “enhanced co-operation” procedure to establish their own FTT. If implemented, the legislation will apply from 1 January 2014. Click here for the Commission’s proposal. 4 Part B – Regulation of Investment Management Development Jurisdiction Stage and Timing Impact and Considerations Current Key Documents and Further Guidance Alternative Investment Fund Managers Directive EU The Directive came into force on 21 July 2011. Implementation by Member States is required by 22 July 2013. The Commission published the Level 2 Regulation (the implementing measures underling various parts of the Directive) (the Level 2 Regulations) on 19 December 2012. The Directive affects all EU managers of funds other than UCITS funds, and all non-EU managers of funds seeking to market in the EU (regardless of whether the fund is based in or outside the EU). Recent developments: At EU level, the Commission’s Level 2 delegated Regulation creates a single rulebook for all AIFMs. The Level 2 Regulation will have direct effect and will be likely be incorporated by reference in Member States’ rulebooks. At EU level, ESMA published its final guidelines on sound remuneration policies under the AIFM Directive on 11 February 2013. In the UK, the FSA published a consultation paper and draft new handbook rules on 14 November 2012. It will publish a second consultation paper in February 2013. In the Consultation Paper, the FSA stated that (i) the first date by which UK firms already managing or marketing AIFs before 22 July 2013 may submit an application for an AIFM authorisation or a variation of permission is 22 July 2013 and (ii) firms managing AIFs as at 22 July 2013 must be AIFMD compliant and have submitted an application for authorisation by 22 July 2014. The Treasury published a consultation paper on transposition of the AIFM Directive (with draft statutory instrument) on 11 January 2013. (continued on next page) Click here for a copy of the Directive. Click here for a copy of the Level 2 Regulation. Click here for ESMA’s discussion paper “Key concepts of the Alternative Investment Fund Managers Directive and types of AIFM”. Click here for the FSA consultation paper. Click here for the Irish Central Bank Consultation. Click here for the HM Treasury consultation. Click here for the ESMA Remuneration Guidelines. 5 Development Jurisdiction Stage and Timing Impact and Considerations Current Key Documents and Further Guidance Alternative Investment Fund Managers Directive EU The Directive came into force on 21 July 2011. Implementation by Member States is required by 22 July 2013. The Commission has not yet published the detailed implementing measures underling various parts of the Directive (the Level 2 Regulations). (continued from previous page) In France, the AMF has indicated that it will (i) consolidate the rules for French asset management companies to create a single category of asset manager, whether regulated under AIFMD, UCITS or MiFID, with the same conditions for authorisation; and (ii) simplify the range of fund products which may be offered to French investors, which will be UCITS, AIF and “other funds” which will include non AIF fund, regulated or not. The AMF will also simplify the range of minimum investments with a simple distinction between no minimum investment amounts for retail investors and 100,000 euros for professional investors. The AMF also proposes to create a French “qualified investor fund” which will be structured in order to compete with the Irish Qualified Investment Fund (QIF) or Luxembourg Specialised Investment Fund (SIF), with a simplified regulatory approval procedure. This fund will be in the form of a corporate entity (SICAV-SA, SAS and perhaps société en commandite (i.e. French limited partnership)) or an FCP. In Germany, the government published a third draft bill implementing the Directive. It is not expected that the final act will enter into force before 22 July 2013. A one year grandfathering period until 21 July 2014 to comply with the German implementation of the Directive will apply to all existing funds and their AIFMs. According to the current draft bill, Germany will abolish private placements with immediate effect, with an exception for ongoing private placements (i.e. those started before 21 July 2013) which will be permitted until 21 July 2014. After this date a full marketing notification to BaFin for any type of distribution will be required. (continued on next page) Click here for a copy of the Directive. Click here for a copy of the Level 2 Regulation. Click here for ESMA’s discussion paper “Key concepts of the Alternative Investment Fund Managers Directive and types of AIFM”. Click here for the FSA consultation paper. Click here for the Irish Central Bank Consultation. Click here for the HM Treasury consultation. Click here for the ESMA Remuneration Guidelines. 6 Development Jurisdiction Stage and Timing Impact and Considerations Current Key Documents and Further Guidance Alternative Investment Fund Managers Directive EU The Directive came into force on 21 July 2011. Implementation by Member States is required by 22 July 2013. The Commission has not yet published the detailed implementing measures underling various parts of the Directive (the Level 2 Regulations). (continued from previous page) Most German closed-ended funds (often organized as a limited partnership (e.g. as a Kommanditgesellschaft)) have only recently (from 1 June 2012) been required to submit marketing notifications to BaFin for their distribution in Germany and were not obliged to obtain permissions for their management companies (i.e. their AIFM). Under the bill, such funds will have to submit new marketing notifications to BaFin and apply for permissions for their AIFMs for the first time. Since notifications/applications in some cases will have to be submitted to BaFin no later than 1 January 2014 (due to applicable periods for assessment by BaFin) and that initially the process for notification and application will be time consuming, clients should start with the necessary actions as soon as possible after the new law comes into force. In Luxembourg, a draft bill implementing the Directive was submitted to the Luxembourg parliament on 24 August 2012. In addition to implementation of the Directive, the draft bill also covers other related changes that will have an impact on the legislation applicable to Luxembourg investment funds. The bill provides for the creation of Luxembourg AIFMs as well as for the possibility of UCITS management companies to be authorized as AIFMs. Non-UCITS management companies will be limited to managing non-AIFs and small-AIFs opting to be out of scope of the Directive. The bill will also will add a new category of Professional of the Financial Sector (PSF), i.e. depositary of an AIF; introduce a Special Limited Partnership (société en commandite spéciale) which is similar to the English limited partnership and update the current Limited Partnership (société en commandite simple) and partnership limited by shares (société en commandite par actions) regimes. It is anticipated that the law will enter into force well before 22 July 2013. (continued on next page) Click here for a copy of the Directive. Click here for a copy of the Level 2 Regulation. Click here for ESMA’s discussion paper “Key concepts of the Alternative Investment Fund Managers Directive and types of AIFM”. Click here for the FSA consultation paper. Click here for the Irish Central Bank Consultation. Click here for the HM Treasury consultation. Click here for the ESMA Remuneration Guidelines. 7 Development Jurisdiction Stage and Timing Impact and Considerations Current Key Documents and Further Guidance Alternative Investment Fund Managers Directive EU The Directive came into force on 21 July 2011. Implementation by Member States is required by 22 July 2013. The Commission has not yet published the detailed implementing measures underling various parts of the Directive (the Level 2 Regulations). (continued from previous page) In Ireland, the Central Bank is using the implementation of the Directive as an opportunity to redesign the current regulatory framework for Irish alternative investment funds and has issued a consultation taking the form of a draft AIF handbook replacing the existing non UCITS Notices and Guidance Notes, representing a consolidated version of the regulatory provisions governing AIFs. The key changes proposed are: (i) removal of the promoter regime; (ii) replacement of the Qualifying Investors Fund regime with an enhanced Qualifying Alternative Investor Fund regime; (iii) introduction of share class flexibility within funds or sub-funds requiring ‘fair’ treatment of shareholders (rather than ‘equal’ under current regime); (iv) replacement of Irish prime brokerage rules with the Directive’s criteria; (v) enhancement of the retail AIFs regime; and (vi) elimination of the Professional Investor Fund regime. Recommended actions: AIFMD will have a substantial impact on authorisation of fund managers, their structure, their operations and the manner in which their funds are run. Firms should consider whether they are in scope, which entity should be authorised as the AIFM, the required new compliance policies and procedures and the required additional regulatory capital. Firms will need to consider their marketing arrangements in the EU, whether they want to use the passport and the additional compliance burden involved. Click here for a copy of the Directive. Click here for a copy of the Level 2 Regulation. Click here for ESMA’s discussion paper “Key concepts of the Alternative Investment Fund Managers Directive and types of AIFM”. Click here for the FSA consultation paper. Click here for the Irish Central Bank Consultation. Click here for the HM Treasury consultation. Click here for the ESMA Remuneration Guidelines. 8 Development Jurisdiction Stage and Timing Impact and Considerations Current Key Documents and Further Guidance MiFID II EU The Commission published in October 2011 a proposed directive and regulation to amend MiFID (MiFID II). MiFID II is currently subject to negotiation between the European Parliament and the Council of the EU. ESMA will need to produce a large number of related Level 2 measures. It is anticipated that the implementation date will not be earlier than mid 2014 to January 2015. The MiFID II proposals include (i) creation of a new type of trading venue within the regulatory framework, the organised trading facility (OTF), capturing all forms of organised trading that do not match existing categories; (ii) significantly increased regulation of commodities trading, including introducing a position reporting obligation and powers for regulators to intervene in trading activity; (iii) new powers for regulators to ban or restrict types of financial products; (iv) new safeguards on algorithmic and high frequency trading activities (mainly to address market volatility); (v) a new regime for 3rd countries which abolishes the UK’s overseas person exemption and replaces it with a requirement for overseas firms providing services into Europe to obtain a form of authorisation and (vi) new pre and post trade transparency rules for non-equity products, including bonds and commodities, similar to the transparency rules which apply to regulated equity markets. Recent developments: The indicative date for the first reading by the European Parliament of MiFID II is 8 October 2013. Click here for the current draft of MiFID II (13 February 2013). CRD IV EU The Commission published in July 2011 a proposal for new capital requirements for credit institutions and MiFID investment firms (CRD IV). The existing Capital Requirements Directive will be replaced with a regulation and a directive: the Capital Requirements Regulation (CRR) and the CRD IV Directive. Investment firms currently subject to the Capital Requirements Directive will be faced with higher capital requirements and new governance requirements. Recent developments: CRD IV is currently subject to negotiation between the European Parliament and the Council of the EU. Political agreement is expected to be reached during the first half of 2013. Recommended actions: The FSA has published a webpage on its approach to implementing transitional provisions in the CRR on own funds requirements, the grandfathering of capital instruments, and the application of regulatory adjustments to own funds. Click here for the current text of CRD IV. Click here for the current text of CRR. Click here for the FSA statement regarding CRD IV implementation. 9 Development Jurisdiction Stage and Timing Impact and Considerations Current Key Documents and Further Guidance MiFID Remuneration Policies EU ESMA expects to publish its final report and final guidelines on MiFID Remuneration Policies by the second quarter of 2013. The FSA published finalised guidance on 16 January 2013 on risks to customers from financial incentives paid to sales staff. Both ESMA and the FSA have proposed rules under MiFID conflicts of interest rules principally focussed on remuneration of staff who sell financial products to the retail market. Both sets of rules are closely aligned. Recommended actions: The FCA (as the FSA’s successor) will adopt the ESMA guidelines in Q2 2013. Firms should review compliance of their remuneration schemes for sales staff with the FSA’s requirements without delay. Click here for a link to the ESMA Consultation Paper. Click here for a link to the FSA’s finalised guidance. Dodd-Frank –Commodity Futures Trading Commission exemptions from registration US – SEC and CFTC The CFTC has adopted final regulations on the use of exemptions from registration for sponsors of private funds. The CFTC has adopted final regulations which modify and remove certain CFTC exemptions widely used by sponsors of private funds. The CFTC Staff has issued multiple no-action letters that may temporarily or permanently assist qualifying sponsors of private funds with avoiding CFTC registration. The Department of the Treasury determined that certain foreign currency forwards and foreign currency swaps are not considered “swaps” for some CFTC jurisdictional issues including whether the contracts are counted toward the CPO de minimis trading registration exemption. The position limits rule was vacated and remanded to the CFTC in autumn 2012 for further work on the CFTC’s cost-benefit analysis. Recommended actions: Private fund sponsors must consider whether they can rely on an exemption from registration, or register as “Commodity pool operators” (and have their registration declared effective) with the CFTC prior to 31 December 2012. If a private fund sponsor can qualify for no-action relief, the sponsor should claim the relief. Dechert has produced a number of DechertOnPoints on the CFTC rules under Dodd-Frank: CFTC Changes Rules Affecting Public and Private Funds CFTC Issues No-Action Relief Extending Compliance Date for Amended Rules 4.5 and 4.13(a)(4) to December 31, 2012 CFTC Staff Releases Responses to Frequently Asked Questions Regarding Rule Amendments Affecting CPOs and CTAs. 10 Development Jurisdiction Stage and Timing Impact and Considerations Current Key Documents and Further Guidance Dodd-Frank – rules on major swap participants US – SEC and CFTC The SEC and CFTC have adopted final rules on “major swap participants”, “major security-based swap participants”, “swap” and “security-based swap”. The CFTC has adopted final rules on “major swap participants”, “major security-based swap participants”, “swap” and “security-based swap”. Recommended actions: Investment managers will need to determine if they are “major swap participants”, which will depend on the scale of their trading in OTC derivatives. The scope of the definition of “commodity interest” now includes many types of OTC derivatives. A fund trading OTC derivatives may be a “commodity pool” and subject to the US CFTC where it was not previously, to the extent the fund has any US investors. Dechert has produced a number of DechertOnPoints: CFTC Finalizes Futures and Swaps Position Limit Rules CFTC Finalizes Swap Data Recordkeeping and Reporting Requirements CFTC Adopts Customer Property Segregation and Other Swap Regulations, Proposes Volcker Rule Impact of CFTC Swap Regulations on Structured Finance Industry. 11 Part C – Regulation of Investment Funds Development Jurisdiction Stage and Timing Impact and Considerations Current Key Documents and Further Guidance US FATCA US The US Foreign Account Tax Compliance Act became law in March 2010. FFIs must register with the IRS through an online “Portal” by 25 October 2013 to be included on an IRS list of participating and registered deemed-compliant FFIs to be published 2 December 2013 and updated monthly. Nonparticipating FFIs will be subject to withholding beginning on 1 January 2014 (for withholding on US source dividends and interest) and 1 January 2017 (for withholding on US source income and gross proceeds). Withholding on non-US source passthru payments will not occur before 2017. New account opening procedures generally must be implemented by 1 January 2014. FATCA is a new reporting and withholding regime intended to prevent US investors from evading tax by investing through foreign entities. FATCA requires foreign financial institutions (FFIs) which opt in to this regime to report information to the US IRS regarding their US account holders. Recent developments: The UK government has signed an inter-governmental agreement (IGA) with the US government to allow “Reporting UK Financial Institutions” to fulfil their reporting obligations on US account holders by reporting directly to the UK Revenue. The IGA also confirms which types of accounts are within scope and the types of UK regulated entities which are “deemed compliant” FFIs and not subject to the requirements. The Irish government has also signed an IGA which is similar to the IGA signed by the UK government. Reporting Irish Foreign Financial Institutions will report directly to the Irish Revenue Commissioners, without needing to withhold on or terminate recalcitrant account holders. Recommended actions: Managers will need to determine whether their funds fall within any “deemed compliant” category, and will need to determine the extent of their reporting or withholding responsibilities and amend account opening procedures as necessary to comply with FATCA. Click here for DechertOnPoint ‘Final Proposed FATCA Regulations Issued’ Click here for a copy of the US-UK IGA. 12 Development Jurisdiction Stage and Timing Impact and Considerations Current Key Documents and Further Guidance UCITS IV, V and VI Directives EU The Council of the EU published a compromise proposal on UCITS V on 17 December 2012, relating to the Commission’s original proposal. Separately, the Commission has published a consultation paper on further changes to the UCITS regime (UCITS VI). The FSA will publish a consultation paper on UCITS V during the first quarter of 2013. The Commission has indicated that UCITS V will apply by the end of 2014. The Commission may adopt its legislative proposal for UCITS VI by the end of the first quarter of 2013. Recent developments: In relation to UCITS IV, ESMA published on 18 December 2012 consolidated guidelines on ETFs and other UCITS issues. These guidelines consolidate ESMA’s existing guidelines on ETFs and other UCITS issues and on repo and reverse repurchase agreements and set out guidance on information to be given to investors on index-tracking UCITS and UCITS ETFs, rules to be applied by UCITS when entering into OTC derivative transactions, criteria for financial indices in which UCITS may invest, and criteria for the recallability (i.e. maximum term) of repo and reverse repo arrangements. The rules reflecting the guidelines will apply in Luxembourg as of 18 February 2013. In relation to UCITS V, the Commission’s key proposals relate to the UCITS depositary function, remuneration and sanctions for breach of the rules. The rules relating to the depositary function are similar to the equivalent provisions in the AIFM Directive. The remuneration requirements relate to the implementation of remuneration policies by UCITS managers and disclosure of total remuneration amounts, and are intended to be consistent with the equivalent provisions of the AIFM Directive. In relation to UCITS VI, the topics which the Commission is consulting on include eligible assets and use of derivatives, efficient portfolio management (EPM) techniques, the use of OTC derivatives, extraordinary liquidity management tools, passporting rights for UCITS depositaries and money market funds. Recommended actions: Check UCITS funds’ compliance with ESMA guidelines on ETFs and other UCITS issues. Click here for the current version of the UCITS V proposal and here for Commission FAQs. Click here for ESMA’s guidelines. Click here for AIMA’s position paper on UCITS V. Click here for the Commission’s consultation on UCITS VI. 13 Development Jurisdiction Stage and Timing Impact and Considerations Current Key Documents and Further Guidance FSA’s Retail Distribution Review UK – FSA The FSA has adopted changes to the COBS sourcebook relating to the distribution of certain retail investment and group personal pension products within the UK. The changes were effective on 31 December 2012. The FSA has adopted changes to the COBS sourcebook relating to the distribution of investment and personal pension products to retail investors in the UK. The most significant reform introduced by the RDR is the ban on commission paid by product providers to advisers in exchange for distributing their financial products. Recommended actions: These rules apply to any investment manager or fund paying commission to FSA authorised advisers of UK retail clients, and came into effect on 31 December 2012. Many firms have created “RDR ready” share classes, which typically carry a management fee at half the rate of the existing management fee, reflecting that no commission is now paid out of the management fee to advisers. Firms should check the terms of their distribution agreements with retail financial advisers to ensure they are compliant with the RDR. Click here for the FSA’s RDR page. Dechert has published a DechertOnPoint on RDR: The FSA’s Retail Distribution Review – Its Impact on Investment Fund Managers. Proposed EU regulation of packaged retail investment products EU The Commission published a proposal for a Regulation on key information documents for packaged retail investment products (PRIPs) in July 2012. The proposal will be considered by the European Parliament and the Council of the EU in 2013. The Regulation is not likely to apply before the end of 2014. PRIPs are all types of investment products “where the amount repayable to the investor is subject to fluctuations because of exposure in reference values or to the performance of assets which are not directly purchased by the investor.” This covers insurance based products, structured term deposits and virtually all investment funds. The Commission has proposed a requirement to provide a “key information document” (KID) when the product is made available to retail investors, applying the same principles in the UCITS Directive’s KIID. Click here for the current draft of the Regulation. FSA proposal to restrict retail distribution of unregulated collective investment schemes UK – FSA The FSA published a proposal on 22 August 2012 to restrict the promotion by authorised firms of unregulated collective investment schemes to retail investors in the UK. The FSA published a letter on 12 February 2013 providing an update on its proposal. The FSA is proposing to remove the ability of intermediaries to promote unregulated collective investment schemes on the basis of a “suitability check” on the investor, and various other exemptions in the table in COBS 4.12. All non-UCITS funds will be subject to the new restrictions. The FSA’s latest thinking is to exclude venture capital trusts, real estate investment trusts and exchange traded products from the new marketing restriction. Click here for the FSA proposal. 14 Development Jurisdiction Stage and Timing Impact and Considerations Current Key Documents and Further Guidance Shadow banking EU The European Parliament announced on 20 November 2012 that it had adopted a non-legislative resolution on shadow banking. The Financial Stability Board (FSB) published a set of policy recommendations in relation to “shadow banking” in November 2012. IOSCO has issued policy recommendations to provide the basis for common standards for the regulation and management of money market funds across jurisdictions. According to the FSB policy recommendations, any investment fund which extends or trades in credit (non-bank credit intermediation) or is a money market fund may be subject to regulatory supervision, on the basis that such funds raise systemic risk concerns. The European Parliament’s resolution includes suggestions such as extending capital requirements to all unregulated entities, imposing limits on the complexity of financial products or considering whether shadow banking entities linked to a bank should be included on the bank's balance sheet. Click here for the FSB’s page on shadow banking. New legislation for Real Estate Investment Trusts (REITs) Ireland The Irish Minister for Finance announced on 5 December 2012 that new REITs legislation will be enacted in Ireland. REITs are established as listed companies and are used to invest in a diverse range of rental investment properties in a tax efficient manner. REITs will be exempt from corporation tax on qualifying income and gains, but will be required to distribute the majority of their profits annually to their investors and these distributions will be taxed at the level of the investor. This new structure should encourage investment in property by facilitating investment from investors seeking income yielding investments. However, given the conditions generally applicable to REITs, such as borrowing restrictions and risk diversification requirements, in many cases the existing regulated and unregulated structures will continue to be the most suitable vehicles for investments in property which do not fit the profile for a REIT. Click here for the Irish REITs proposal. D2013UCITS VIThe Commission is expected to adopt its legislative proposal for UCITS VI by the end of the first quarter of 2013.Review of Market Abuse DirectiveThe EU parliament will consider the proposals to review the Market Abuse Directive in June 2013.UK retail distribution of unregulated collective investment schemesThe FSA will publish a policy statement with the finalised rules and guidance on the retail distribution of UCIS and similar products.AIFMDImplementation of the AIFMD into local law by Member States is required by 22 July 2013. The first date by which FSA authorised firms already managing or marketing AIFs before 22 July 2013 may submit an application for an AIFM authorisation or a variation of permission is 22 July 2013.UK new regulatory structureThe transfer of powers to the new Prudential Regulation Authority and Financial Conduct Authority and abolition of the FSA (legal cutover) will take place on 1 April 2013.FATCAThe deadline for FFIs to enter into an agreement with tax authorities, or register as deemed compliant, is 31 December 2013.FATCAThe UK government is expected to include provisions of the US-UK FATCA treaty in the Finance Bill 2013.EMIRThe obligation to report interest rate and credit derivatives to trade repositories starts on 1 July 2013. Q1Q2Q3Q4Regulatory Calendar – Key MilestonesAttorney advertising. Prior results do not guarantee a similar outcome.REGULATORY CALENDAR – KEY MILESTONES (cont’d)D2014EMIRThe FSA estimates the first quarter of 2014 as the earliest date when the clearing obligation will apply.The obligation to report other classes of derivatives to trade repositories starts on 1 January 2014.Solvency IIImplementation of Solvency II Directive is required by1 January 2014.FATCAThe first date for withholding under FATCA to apply is 1 January 2014.AIFMDThe deadline for UK managers managing AIFs as of 22 July 2013 to be compliant with the AIFMD and to have submitted an application for authorisation is 22 July 2014.Review of Market Abuse DirectiveThe earliest expected time for implementation of the changes to the Market Abuse Directive is the end of 2014.UCITS VThe Commission has indicated that UCITS V will apply by the end of 2014. PRIPsThe Commission has indicated that the PRIPs requirements will apply by the end of 2014.Financial Transactions TaxThe possible implementation date of the FTT is 1 January 2014.Q1Q2Q3Q4Attorney advertising. Prior results do not guarantee a similar outcome.

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Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

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